Canadian Dollar: USD/CAD (CAD=X) Tanking
The Canadian dollar is underwater, although not as deep as it was yesterday. USD/CAD spiked to $1.3795 from $1.3635 yesterday due to a wave of U.S. dollar demand against the major G-10 currencies. U.S. President Trump’s plan to eliminate payroll taxes for the rest of the year, and promises to provide support for hourly workers, airlines and the cruise industry fueled demand for US equities and improved the U.S. economic growth outlook.
The Canadian dollar also suffered from the steep plunge in oil prices. Saudi Arabia is so unhappy with Russia’s refusal to agree to the Kingdom’s oil production cut plan, they started a market share war, by slashing prices for crude. West Texas Intermediate dropped from $46.10/barrel on Friday to $27.33 on Monday. Prices have recovered, but the gains have been meager. WTI is trading at $33.11/barrel in Toronto. The American Petroleum Institute (API) said that US crude inventories rose 6.4 million barrels in the week ending March 6, which weighed on prices overnight.
The drop in oil prices is a huge negative for the domestic oil industry. Anti-energy Federal government policies have led to the cancellation of many mega-oil projects. The government’s lack of support for new oil pipelines exacerbates distribution issues, which significantly reduces oil royalty payments to the Federal coffers. That isn’t a new problem, but it will limit Canadian dollar gains.
Coronavirus fears spurred the Bank of England to action. The BoE slashed the Bank Rate to 0.25% from 0.50% It took action because “risky asset and commodity prices have fallen sharply, and government bond yields reached all-time lows, consistent with a marked deterioration in risk appetite and in the outlooks for global and UK growth. Indicators of financial market uncertainty have reached extreme levels.” GBPUSD traded erratically following the news, dropping to $1.2834 before spiking to $1.2953.
The Canadian dollar opened with a small gain compared to yesterday’s close, but has since deteriorated in early trading. Today’s price action will be determined by Wall Street equity moves, oil price action and Trudeau’s stimulus plan. There are not any notable economic reports on tap.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 1.33.
The projected upper bound is: 1.39.
The projected lower bound is: 1.36.
The projected closing price is: 1.38.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 9 white candles and 1 black candles for a net of 8 white candles. During the past 50 bars, there have been 34 white candles and 16 black candles for a net of 18 white candles.
Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 88.0898. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 7 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 81.91. This is where it usually tops. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 21 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 181.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 3 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 9 period(s) ago.
Rex Takasugi – TD Profile
FOREX CAD= closed up 0.005 at 1.377. Volume was 91% above average (neutral) and Bollinger Bands were 162% wider than normal.
Open High Low Close Volume___
1.372 1.378 1.368 1.377 107,949
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 1.35 1.32 1.32
Volatility: 12 7 6
Volume: 97,563 62,627 64,315
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FOREX CAD= is currently 4.2% above its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect moderate flows of volume into CAD= (mildly bullish). Our trend forecasting oscillators are currently bullish on CAD= and have had this outlook for the last 35 periods. Our momentum oscillator is currently indicating that CAD= is currently in an overbought condition.